The South African ferrochrome industry has benefitted from recent events in China, which commodity research consultancy Roskill says has removed significant global capacity through the closure of small furnaces.
While higher-cost furnaces in southern China have been able to fill the short-term gap, the demand expectations will require South African plants to remain operational throughout this year.
Taking this into account, Roskill predicts that the benchmark price for the third and fourth quarters of this year will maintain a premium to the South African cost structure.
However, beyond this year, the requirement of South African ferrochrome capacity to operate at its current high use rate remains at a tipping point, especially with new ferrochrome capacity already under construction elsewhere in the world to meet rising demand, Roskill warns.
Therefore, the consultancy warns that unless South African ferrochrome furnaces regain a competitive advantage, the benchmark price will likely drop below the higher-cost producers as supply tightness is relieved.